Artificial Intelligence

Shein sued Temu. Temu sued Shein. The war over fast fashion is heating up.

To take a step back: Shein doesn’t operate like traditional consumer brands. Instead of owning factories that make products for it exclusively, the company works with a vast network of independent Chinese factories. Most times, these factories create the designs, manufacture the products, and sell them to Shein, entrusting the platform to deal with other processes, like listing, customer service, and shipping. 

Shein offers these suppliers a steady stream of overseas orders. In exchange, it buys the products at very low prices and requests that the suppliers remain loyal to the brand. “As the dominant ultra-fast-fashion retailer, Shein knows that manufacturers need Shein’s volume and its access to the US market and it is, therefore, able to coerce manufacturers into arrangements that force manufacturers not to do business with Temu,” says Temu’s filing. 

This has apparently created a big headache for Temu. The new player’s business model seeks to replicate the success of Shein’s in many ways. Both have capitalized on cheap international shipping, China’s strong manufacturing capacity, and, crucially, the supply chain that Shein pioneered.

For a while, the companies differentiated themselves by the kind of products they sold: Shein is more about apparel, while Temu is more about household products. But each platform is now looking at the other’s primary product lines too, making the companies more direct competitors—meaning that they are going after the same suppliers.

Since both of them rely heavily on maintaining an expansive network of low-cost suppliers, it would be devastating if one platform—especially the more established one—forced producers to choose between the two. This is essentially what Temu is accusing Shein of doing.

(To be fair, Temu itself is no stranger to accusations of coercion against suppliers. Many Chinese sellers have complained that the platform forces them to accept extremely low prices or arbitrarily ends their business when it finds a cheaper supplier.) 

Historically, exclusivity agreements have not been uncommon in Chinese tech fights. For more than a decade, companies like Meituan and Alibaba’s Taobao forbade vendors from working with competitor platforms, until the Chinese government explicitly banned such deals in an antitrust push in 2021.

But publicly exposing this practice today in the US doesn’t seem like a wise thing to do, at least in my opinion. The popularity of Shein and Temu has already caught the eyes of politicians and policy experts in Washington, who see them as the next privacy or intellectual-property threat from China. And what they are accusing each other of doing will almost certainly become ammunition for future criticism. In that case, maybe neither of them will be able to survive in the US market.